Capability debt is crippling the insurance industry

Systems of the past

Many insurance companies across the world still rely on platforms that were built in the 80s or 90s. These systems were never designed to handle the speed, scale or innovation that is demanded today. However, they are at the core of underwriting, claims and policy administration. This means that any modernization can feel risky and expensive. But doing nothing is even more risky.

These legacy platforms are often tightly integrated with business-critical processes, making insurers hesitant to change them. However, the longer they remain outdated the more complex and costly it is to maintain. Modern expectations around availability, personalization, speed and digital self-service are difficult to meet if the infrastructure was built for a different era.

Outdated processes

Alongside technical debt is process debt. This is the manual and fragmented workflows that slow down operations and cause frustration among staff as well as customers. HFS Research states that there is $66 billion in process inefficiency in insurance, most of which sits in claims processing.

From manual inputting of data to inconsistent communications between departments, these inefficiencies add up over time. Employees are weighed down with repetitive, mundane tasks. This reduces morale and limits time spent on higher-value activities like customer engagement or fraud prevention. Business process management can help address these inefficiencies by streamlining and automating workflows.

The tipping point

The insurance industry has reached a tipping point. Customers expect seamless digital experiences, and insurers are expected to respond to increasing risks and comply with stricter regulatory demands while providing a modern system of engagement. But heritage systems and outdated processes are making it difficult to respond with the agility and speed that the market requires.

The pressure is also coming from the inside. Internal teams need better tools to make faster decisions, automate repetitive tasks and collaborate across the value chain. Younger professionals entering the job market also expect to work in modern, tech-enabled environments. HFS Research reports that 96% of underwriters are still spending at least two hours every week re-entering data. This is neither efficient nor sustainable.

What’s more, regulators are demanding real-time data visibility and transparency. This creates additional risk exposure and compliance burdens for insurers that delay modernization.

The cost of doing nothing

For many insurers, the instinct is to postpone modernization efforts because of the perceived cost, complexity or risk. But delaying transformation will inevitably cost far more in the long run.

Competition in the insurance industry is fierce. Nimble, tech-driven companies and digitally driven competitors are capturing market share by offering personalized products, faster claims resolution and superior customer experiences.

But the cost of doing nothing is more than financial. It’s also reputational. Falling behind in customer satisfaction or claims response times can damage trust and loyalty, especially in an industry where relationships are built on reliability and speed.

The smart way to modernize

The good news is that a full-scale, high-risk system “rip and replace” isn’t the only option. We recommend a more pragmatic, three-phased approach to modernization.

This involves tackling technical and process debt incrementally. Instead of trying to replace everything at once, insurers can begin by stabilizing their core, layering new capabilities on top of it and then slowly transforming from there.

It’s time to acknowledge and tackle your debt

Insurers can no longer afford to ignore the growing weight of technical and process debt. And it’s not just an IT problem. It’s a business challenge that affects every part of your organization, from operations and compliance all the way to customer experience and growth.

The insurance industry needs a plan to stay competitive. And that plan begins with recognizing the scale of the problem and understanding that a phased, partner-supported approach makes modernization achievable.

DXC Technology has partnered with ServiceNow to bring you Assure BPM. It integrates AI, data, and hundreds of workflows to reduce process debt, enhance operational efficiency, and improve customer satisfaction. It's fully integrated with the DXC Assure Platform and is the solution that unifies disparate systems and automates processes across the entire policy lifecycle.

Transformation isn’t just about solving today’s problems. It’s about building a foundation for long-term resilience and innovation. And the good news is that you can start today.

If you’d like to read more about process and technical debt, click here to download the HFS Research whitepaper.